Trading Bitcoin: More Declines Incoming?

More Declines Incoming?

Bitcoin is tentatively consolidating at the $8k level, however no significant support has been formed yet. When viewing the weekly chart above, you can see that Bitcoin does not have a notable support level until the moving averages at $6k. Additionally, Bitcoin’s weekly RSI is not yet in oversold territory. In fact, Bitcoin’s RSI reached even lower levels after dropping from $6k to $3k. Therefore, the market sees more downside potential for the largest cryptocurrency in the world.

Daily

Yesterday, the bears won the critical battle over the 200MA (orange). After closing below the 200MA, the bears are in control with the moving average now acting as strong resistance.

4 Hour

The sequential indicator on the 4 hour chart above is currently on a red 2 of 9 candle. If our current red 2 candle closes below the previous red 1 candle, that is a signal to place a short trade. Depending on your risk tolerance, you can set your stop loss at a variety of prices. But for this situation, we would place the stop loss at the top wick of the previous candle (roughly $8.1k). Additionally, the Lucid SAR (blue x’s) is acting as bearish resistance at $8.1k. Therefore, both the sequential indicator and the Lucid SAR are presenting bearish signals.

Conclusion

Now that Bitcoin has closed below the 200MA, the bears have taken momentum and are in control. On the 4 hour time frame, a short trade was activated by the sequential indicator and the Lucid SAR. If Bitcoin continues to consolidate, it is unlikely that buying momentum will enter the market. In order to retest the $9k resistance level, Bitcoin needs to experience strong buying momentum in the form of a ‘V’ shaped recovery. If Bitcoin cannot bounce back, then price is facing a potential 60% correction to $5k.

Disclaimer: The author of the article hodls Bitcoin.